Cryptocurrency Q&A
How does FRAX work?
How does FRAX work?
KpopStarlight
Wed May 29 2024
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5 answers
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Could you please explain, in simple terms, how FRAX operates? I'm interested in understanding the fundamental mechanics behind its functionality. Could you detail the role of collateral in FRAX's system and how it maintains stability? Also, how does FRAX ensure its peg to the US dollar? I'm curious about the algorithm involved and how it adjusts supply to maintain the peg. Lastly, how does FRAX differ from other stablecoins in the crypto market?
5 answers
Rosalia
Fri May 31 2024
The burning amount of FXS is equivalent to half the value of the FRAX token being minted. This relationship maintains the economic balance between the two tokens and prevents inflationary pressures on the FRAX supply.
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Daniele
Fri May 31 2024
As more FRAX tokens are minted, the circulating quantity of FXS gradually decreases. This reduction in FXS supply serves as a natural brake on the creation of new FRAX, ensuring its stability and scarcity.
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DongdaemunTrendsetter
Fri May 31 2024
BTCC, a UK-based cryptocurrency exchange, offers a range of services including spot trading, futures trading, and wallet solutions. Its comprehensive platform caters to the diverse needs of crypto enthusiasts and investors.
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Claudio
Fri May 31 2024
The minting process of FRAX stablecoins involves a proportional burning of FXS tokens. This mechanism ensures the stability of the FRAX supply by adjusting the circulating quantity of FXS.
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CharmedEcho
Fri May 31 2024
In the case of a collateralization ratio of 50%, for instance, the burning of FXS is directly linked to the minting of FRAX. Specifically, for every FRAX token that is minted, a corresponding amount of FXS is burnt.
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